2005-01: Why has Australia Done Better than New Zealand? Good Luck or Good Management?

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The relative performance of the Australian and New Zealand economies has been the subject of many questions. Why, if New Zealand reformed so much, has the Australian economy performed so much better? Why are average incomes in Australia so much higher than in New Zealand?

This paper explores some of the potential explanations for the different levels of labour productivity in the two countries and attempts to quantify the effects on productivity of a range of possible causal factors. Potential causal factors examined include the level of education, Research and Development intensities, regulatory policy differences, the interaction of productivity with participation, and the potential impact of geography, location, and population.